Monday, April 7, 2008

People Power and Mass Demonstrations

Or Who has the Cure for the Present Woes?

This was once again a very interesting weekend in Phnom Penh, at least for politically inclined people. The Sam Rainsy Party had called for a mass demonstration to protest the recent surge in consumer prices, most notably rice, the main staple for most Asian countries. They expected 5,000 people to show up. Originally it was supposed to be a march from market to market but the Ministry of Interior only approved a demonstration in front of the previous assembly hall.

Unfortunately, it was anything but a mass demonstration as only 300 to 500 people heeded the SRP’s call. The party tried its best to put a good face on it but the fact remains that this was an ill-conceived demonstration to begin with and the underlying cause was dubious at best.

Demonstrations are a legitimate form of making the people’s thoughts, ideas, grievances, and demands heard and known to their political leaders, employers’ associations, or even their churches. It is very often a necessary and vital instrument in the political process and in labor/management relations. Many such demonstrations turn into people power, as in the Philippines, Indonesia, Thailand, East Germany, the former Czechoslovakia, East Timor, the Ukraine, and others. Many a time these demonstrations brought down governments, as in the Philippines, Thailand, Indonesia, and the Ukraine. It even brought down the entire European Communist system when the East Germans started their Monday demonstrations, which led to the demise of the German Democratic Republic as the Soviet Union, facing its own internal problems, did not move to come to their rescue. This example spread across the East-European Communist bloc like a wildfire, eventually reaching Moscow and toppling the Soviet government and the rest of Communist regimes. Some of them resurfaced under the guise of quasi-democratic elections but were essentially a continuation of the old regime as in Belarus and the Ukraine, and though under different auspices, Cambodia.

Sam Rainsy may have had something like those almost revolutionary and legendary demonstrations in mind when he spoke about people power in the context of the possible rigging of the upcoming elections. But Cambodia is not Eastern Europe, nor is its people ready and educated enough to understand this; nor could Cambodia afford to go through a period of unrest again so shortly after its tragic history. The precarious but stable situation of the country in 2008 would be severely impaired by large-scale demonstrations. The people who would suffer the most would again be the poor. The economic achievements, although far from satisfactory overall, would be severely imperiled, if not altogether destroyed.

People power is a veritable and mighty weapon in making the people’s voices and will heard. But such peaceful demonstrations must involve more than a mere handful of activists. With 7 million voters nothing less 100,000 demonstrators would be a force to reckon with. This number would mostly likely swell with each demonstration, and the government would then most certainly pay attention. It would be very hard for any government to use force against such a huge number of its own people. Only the most ruthless regimes, like the one in Myanmar or even China, would not shrink back from brute force in putting them down.

But 5,000 or 10,000 just won’t make a dent in the government’s impression of what the people want and think. These numbers are nothing but a slight irritation and a disruption of public life. The people calling for those demonstrations must realize this and also expect hampering and intimidating tactics like buses and trucks with demonstrators being stopped on access roads. The demonstrations in Eastern Europe spilled over into the ranks of the security forces. The activists engaged them by convincing them that everybody has to gain from a drastic change. This won’t happen in Cambodia.

In the end it would indeed be a situation as the one to which Hun Sen referred when he indirectly ridiculed the term people power in Cambodia. He said Cambodia doesn’t need people power when 7 million voters have decided and the results are clear only to have 2,000 demonstrators question the veracity of the outcome.

It appears as if Sam Rainsy and his party wanted to try their mettle in organizing a mass demonstration as a test of things to come. The rising cost of living gave them a legitimate theme. If they managed to raise 5,000 for this, so their thinking might have gone, they would be able to raise 10,000, 20,000 or even 50,000 after July 28, if they thought the elections were fraudulent.

It must have been a bitter disappointment for them to see their concerns echoed by only so few. Nobody has so far found a reason for the masses abstaining, but perhaps most of them saw it for what it was, an electioneering event. The SRP needs all the publicity it can get as currently their profile is definitely somewhat hazy in the public’s eye as they have not been able to really motivate the broad masses with their campaign rhetoric, and more prosperity has reached even rice farmers who sold their land for good money.

Even their rallying cry was so transparent in its populism and, moreover, patently wrong and disingenuous.
Here are some excerpts from their flyer they distributed throughout the city.

When H.E. Sam Rainsy was the Minister of Economy and Finance between 1993 and 1994, the prices of goods on the market were low and stable. At that time, the price of one liter of gasoline was only 600 riels, and one kilo of rice cost only 600 riels.

His tenure did not even last one year. No new government can make any tangible impact on the economy in such short a time. Additionally, he was in over his head as well. Without the French bureaucrats left over from UNCTAC time he would have been completely lost.

The prices were stable on account of the neighboring economies, which supplied most of the goods to Cambodia at that time, including about 50% of their rice requirements, and the prevailing economic climate.

Oil was about $15 a barrel in 1994; in March it reached its peak at slightly over $110 per barrel. In 1993 gas prices at the pump were $.23/ltr in the U.S. and $1.1/ltr. in Europe, now they are $1.00/ltr in the U. S. and $2.16/ltr in Europe.

The rice shortages in several rice-exporting countries as far away as Egypt have their impact on Cambodia, believe it or not. Importing countries turned to other rice producing nations, e. g. Cambodia - a simple supply and demand situation, which drives prices up everywhere, not only in Cambodia. The same pinch is felt in Vietnam, Thailand, Malaysia, etc.

To attribute the relatively stable price levels of the early 1990’s to Sam Rainsy is plain hogwash. To say it caught the government unawares may be telling the truth. But there wasn’t one government not completely taken by surprise by the sudden emergence of that problem.

1- Lower taxes on gasoline and lower the profit margin made by gasoline distributors.

The budget listed approximately $101.5 million in tax revenue on gasoline (import duties and tax on petroleum products). On the one hand the SRP calls for increased salaries/wages in line with inflation and on the other hand it wants to cut revenue from a state budget that is 50% funded by foreign donors? That isn’t very prudent, is it?

Lowering the profit margin of an enterprise is state intervention in a free market economy. They can tax profits higher than they currently do, but prescribing profit levels is not line with a free democratic society and market economy. Again, it doesn’t seem as though a lot of thought had gone into this - and this from a banker/finance expert?

2- End the commercial monopolies granted to a number of cunning merchants and dishonest companies, which allow them to increase the prices of goods as they please because of lack of effective competition.

I don’t know whom they are referring to as ‘number of cunning merchants’ and ‘dishonest companies’ that have monopolies. But it seems like a bit of a reach to claim the price of rice solely has to do with what’s called gouging in the West, that is, taking advantage of an emergency situation to increase price to usurious levels. Most certainly, there have been such practices, and the government needs to clamp down on those, but to condemn businesses across-the-board again looks like a populist shot.

3- Ensure an adequate economic, financial and monetary policy so as to preserve the stability of the riel.

The riel is pegged to the U. S. dollar, in other words part of the inflation is imported. The Cambodian economy is overheated in the construction and real estate sector considerably contributing to inflation. As most of the economy is cash-based there is very little the government can do to curb inflation, e.g. raise interest rates, other than implement price controls, which is anathema to the principles of a free market economy. Financial stability will be a challenge for the years to come for any government of Cambodia.

4- Control the printing of bank notes so as to avoid issuing paper money in an irresponsible and disorderly manner. If the government continues to inflate money supply, the riel will continue to depreciate and inflation will continue to accelerate.

What they are saying is correct but monetary policy will largely hinge on the further economic development. Whether or not the government prints more riels right now will have little impact on inflation as long as this is a virtual dollar-based economy and consumers continue to spend their money with abandon, as is the case now, at least in Phnom Penh. The price of gasoline doesn’t seem to influence the purchase of cars, SUVs, and motorbikes.

5- Implement land reform by distributing unused state-owned lands to landless farmers or those who do not have enough land to live on, so as to increase agricultural production nationwide. For the tens of thousands of hectares of lands grabbed or stolen from the State or from the people by corrupt government officials and cunning businessmen, they must be returned back to the people so that Cambodian farmers can effectively plant crops needed to counter inflation.

Well, land reform is certainly needed and giving farmers state-land to cultivate is a noble undertaking. Right now, the government, however, is selling state-owned land to the highest bidder with deep pockets for extra expenses in order to bolster their revenues. Agricultural production could be vastly increased if more modern methods were taught and applied, e. g. irrigation of rice paddies so as to enable them to grow two crops a year. That would also alleviate any shortage of rice in the future.

If the prices of goods double, salaries must also be doubled.

This, of course, is as populist as it gets. They contradict themselves with their demand for lower gasoline taxes and don’t point out where that money should come from. Curbing corruption is not the panacea they make people believe it is. Corruption in its present form is more of a special tax levied by officials in compensation for their low salaries. It is a myth to believe the $300 to $500 million referenced in various tracts is money the government loses in revenue. It is money people pay for services that would otherwise be free or provided for a nominal charge. The only way to increase state revenues in the short term is to institute a comprehensive tax collection system that targets the people and businesses, which make enough profits in the Cambodian economy so they should also pay back what they rightfully owe to Cambodian society.

And, finally, let me quote the latest country rating by Standard & Poor:

Standard & Poor's Ratings Services said it affirmed its 'B+' long-term foreign and local currency and 'B' short-term foreign and local currency sovereign credit ratings on the Kingdom of Cambodia.S&P said the ratings are supported by the country's record of strong growth in a framework of prudent macroeconomic policies and continued engagement of international donors, in addition to the concessional nature and favorable terms of Cambodia's debt that ensures continued external liquidity improvement.However, the ratings on Cambodia are constrained by vulnerability of growth and external liquidity due to the country's underdeveloped and narrow economic profile, S&P said.The outlook remains stable, but could improve if the government implements measures to boost the chronically low revenue collection.

This again flies in the face of all the SRP’s public announcements. Unfortunately, as so often in the recent past, Sam Rainsy just plays on the fears of the ignorant public hoping to garner their votes in the upcoming election. By the same token, the unsuccessful ‘mass demonstration’ must be seen as just another attempt to influence the masses in this vein with half- and even untruths. One can only hope that, given the reins of power, Sam Rainsy would know how to handle a situation as the present one. A 24% increase of food prices in the last 6 months, and an 11% overall inflation, are very somber signs on the horizon for Cambodian people. It appears doubtful that the opposition would indeed have recipes to keep it in check. If they have them they haven’t shown them to anybody yet, but they ought to for their own good. They way the SRP leadership campaigns at the present time does not lend itself to their enhanced credibility. Quite the opposite.

Jay Rupert

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